Published on Global Research.ca, by Damien Millet and Sophie Perchellet and Eric Toussaint, April 3, 2010.

There is a striking contrast in the most industrialized countries at the epicenter of the global crisis that broke out in 2007-2008: the governments and their friends running the major banks are congratulating themselves on having saved the financial sector and initiated limited economic recovery, but people’s living conditions continue to deteriorate. Furthermore, with stimulus packages for the economy of over 1000 billion dollars, the major financial institutions have received government aid in the form of bail out funds, but the different States have no say in the management of these companies or are not taking advantage of this opportunity to radically change the policies governing them.

The path chosen by governments to emerge from the private financial crisis caused by bankers has led to an explosion in public debt. For many years to come, this sudden growth in public debt will be used by governments as a form of blackmail to impose social cuts and to deduct from the wages of “those at the bottom” the money needed to repay the public debt now held over our heads by the financial markets. How will this scenario be played out? Direct taxes on high income earners and companies will be reduced, while indirect taxes, such as VAT, will increase. Yet, as a percentage of disposable income, VAT is mainly a burden on low income households, which makes it an extremely unfair tax. For example, with a 20% VAT tax, a poor household that spends all its income just to survive, pays the equivalent of a 20% tax on its income, whereas a well off household, which saves 90% of its income, and therefore only spends 10% of it on daily expenses, pays the equivalent of a 2% tax on its income.

Therefore, the richest win twice: as a percentage of their disposable income, they contribute the least amount to taxes, and with the sums they have saved, they buy stocks of public debt and make profit from the interest paid by the State. On the contrary, wage earners and pensioners are doubly penalized: their taxes increase while public services and their social security benefits deteriorate. The repayment of public debt is therefore a mechanism for transferring revenue from “those at the bottom” to “those at the top”, as well as an effective form of blackmail in order to pursue neo-liberal policies benefitting “those at the top” … //

… We believe public policy should be reformulated as follows: “You large creditors have greatly profited from public debt, but fundamental human rights are seriously threatened and inequalities are widening at an alarming rate. Our priority is to maintain and guarantee these fundamental rights and it is you, the large creditors, who should pay for this. We are going to tax you according to the amount that you loaned back to us: the money will not come out of your pockets but the loans will disappear. Count yourselves lucky that we are not demanding back the interest we have already paid you to the detriment of citizens’ interests!” In a nutshell, we support the idea of taxing the large creditors, such as banks, insurance companies, and hedge funds, as well as wealthy individuals according to the money owed to them. This tax revenue would give the State the means to increase social spending and create socially useful and economically sustainable employment. It would eliminate public debt in the North, without making the people who are the victims of this crisis pay. At the same time, it would place the entire burden on those who have caused or worsened the crisis, and have already greatly profited from this debt.

Our proposition would entail a radical change towards a policy of redistribution of wealth, benefiting those who produce wealth and not those who speculate on it. If coupled with the cancellation of foreign public debt of developing countries and a series of reforms (including wide ranging fiscal reform, a radical reduction in working hours without loss of wages and with compensatory hiring, and the transfer of the financial sector to the public domain with citizen control), these measures could enable us to emerge from the current crisis with social justice and in the interests of the people. (full text).